I would like to integrate Mean-Variance utility type trades in a Macro Model. These agents will typically hold a trading position
K = c0 * ER / VR
Where c0 is a parameter, ER is the expected return, VR is the variance.
What happens in steady state is ER=VR=0 and the traders are indifferent to hold any position. Lets say I want them to hold K*
However, the equation I listed becomes
K* = c0 * 0/0
Is there any way to get around this?